Lawmaker: $50 cruise tax is no big deal
The cruise ship industry and its clients could easily shrug off a $50 per passenger state tax, a Palmer legislator said Tuesday.
To illustrate his point to a House committee reviewing his head tax proposal, Rep. Carl Gatto, R-Palmer, showed a series of charts describing enormous profits for two major cruise lines in the past couple of years.
The charts showed that in the 2004 cruise season the cruise lines - Royal Caribbean and Carnival Cruises - increased their net income 66 percent and 58 percent, respectively, according to federal financial disclosures.
The cruise lines, however, warn that their passengers will spend less money in Alaska if the state enacts a $50 head tax. Industry representatives plan to testify against the bill at its second hearing on Thursday.
"We are already paying for the services we use through municipal taxes and fees," said Don Habeger, director of industry relations for the NorthWest CruiseShip Association.
The association paid Juneau's McDowell Group to study the issue. The firm concluded that the industry pays more than $30 million a year in local government taxes.
But Gatto said government taxes on industry are much higher in Mexico. He cited a Carnival Cruise 2004 spring break tour along the Mexican coast that listed government fees totaling $191.26 per passenger.
The committee members asked only a few questions about the bill during the hearing.
Rep. Gabrielle LeDoux, R-Kodiak, said she was concerned about how other states are interpreting cruise ship taxation under the U.S. Constitution.
Rep. Woody Salmon, D-Beaver, said he is worried that the new tax could cause cruise ship tourists to limit their travel farther north in Alaska.
"I think we shouldn't keep taxing them to a point where they don't come up north," he said.
Gatto also gave the House Committee on Community and Regional Affairs a copy of a state Office of Management and Budget chart from two years ago that lists almost a dozen state operating costs, such as debt service for harbors, which are potentially attributable to the cruise ship industry.
The total annual figure that could be attributable to the cruise lines came to $115.8 million, but even some tax proponents agree that the chart doesn't actually define the cruise industry's fair share.
"We do incur costs related to the cruise industry. So do the harbors and ports," said Brad Pierce, a state analyst. It is difficult to break down the costs, he said.
It's a gray area that continues to persist in the battle over cruise ship taxation that began three years ago in the Legislature.
Gatto's bill is one of three proposals now under consideration.
His measure would put half of the money generated from the tax in the state's general fund and $5 per passenger into the state's five ports of call.
Another bill by Rep. Paul Seaton, R-Homer, would charge $75 per passenger and send two-thirds to the general fund and the remaining third to communities to reimburse them for costs attributable to the cruise industry.
A certified 2006 voter initiative would charge a $45 head tax, as well as a 33 percent tax on gambling in Alaska waters and more stringent requirements for pollution monitoring.
Last year, the industry paid $844,750 for air and water quality monitoring at their ships.
Habeger, of the cruise association, said the industry doesn't believe its tax money should be going into the state's general fund to pay budget items such as improved recreation trails, schools and fire departments.
"We would hope that the Legislature deals with that (question) now instead of referring it to the courts," Habeger said.
Among the other reasons Gatto said a state head tax is needed is to counter the cruise lines' tendency of playing communities like Whittier and Seward against each other to fight local head tax measures.
The cruise industry stopped calling in Haines when it enacted a $2.50 head tax, though ships still make regular calls in Juneau and Ketchikan, which charge $5 and $4 per passenger, respectively.
The bill would "level things for communities," Gatto said.